Honey, I Shrunk the Inventory

Speed Reading the Tea Leaves

Breaking News: The inventory on the Upper West Side will only last 5 ½ months! (Cue the Psycho shower scene music).

For those of us involved in the recent self-imposed insanity otherwise known as "year-end" closings, it was with interest that I read the analysis of Q4 by my favorite soothsayers, Mattingly, Miller andRosenblatt. Was it fear of the fiscal cliff, with the likelihood of capital gains increasing? Perhaps the driver was the expected expiration of the $5,000,000.00 Federal gift exemption (which has actually been made permanent post-cliff). Yes, both of those factors played a role, together with seller capitulation, but at the end of the day, the tail wind for the more than 2,500 transactions that were completed in the fourth quarter, was the diminishing number of apartments available for the increasing numbers of buyers. The glut of too many homes for sale had morphed into the famine of too few. It was the buyer panic of 2012...

The False Urgency of Now

Nothing ratchets up the anxiety level of a buyer more than the scarcity of housing when a purchase is anticipated. The equation usually works as follows: as inventory increases, the value of homes decreases. The corollary is often true as well. Once a real estate market recovers from a crash, as inventory is absorbed, prices start the journey back to frothy and the whole process of peaks and valleys begins anew. Manhattan's climb back from the bottom has not exactly followed that pattern. Although sales volume increased, the prices of apartments remained depressed for a number of reasons (see soothsayers referred to above). Finally, however, as 2013 begins, the lack of inventory causing jigginess in the brokerage community, will no doubt lead to an increase in the cost of apartments. For long suffering sellers, there is actually light at the of the tunnel.

What Are We Talking About...

Fact: If an apartment sells for $800,000.00, rather than $900,000.00, it has very little impact on the broker (each 100K reduction costs the broker $6,000.00, give or take). But to the seller, the price difference is enormous. As sales volume increased dramatically over the past two years, there was a significant recovery for real estate brokerage, but not so much for sellers. For many on the sell side, who could wait no longer, it was time to take their medicine and sell at painful discounts. A lack of inventory may be frustrating for brokers in search of new listings, but it is a godsend for sellers. Finally, the ongoing recovery should translate into better pricing. Not exactly 2007, but better days are ahead for those looking to sell.

Residential Reality: We Shall Survive Low Inventory

As the local real estate economy gains momentum, it is inevitable that available housing will shift from too many to too few. With the larger national economy strengthening, low interest rates still available for the foreseeable future, employment prospects improving, together with a number of other metrics all on the positive side of the meter, factors point to a very good year ahead for New York City residential real estate.

Be cautious with out-of-state banks and Internet lenders...

Asked and Answered

I don’t smoke, but the smell of smoke is wafting into my apartment from my neighbor. Is there anything that can be done to remedy this condition?

My mortgage lender has informed me that the cooperative in which I am purchasing an apartment has inadequate insurance coverage and has requested that the co-op increase its coverage to meet the bank’s new minimum requirements. Can the bank withdraw its underwriting due to a lack of insurance coverage by the co-op?

A co-op owner asks: I have found that maintenance is usually higher in coops than in condos because of the contribution by the shareholders to the building's underlying mortgage payments. In condos, the unit owners only pay for real estate taxes and common charges for common areas. Will the monthly maintenance be reduced after the underlying mortgage has been fully amortized?

We just submitted the Board package and we realize that we neglected to disclose a lawsuit against my husband’s company, in which my husband is named as a defendant? The lawsuit is covered by insurance and my husband is indemnified from liability by his employer. Should we notify the managing agent and amend the purchase application?

We are negotiating the contract and we just found out that there is a substantial assessment that will go into effect the month that we close on the purchase. Should the assessment be deducted from the purchase price at closing?

I am buying an apartment in a small building and I just found out that the elevator is being renovated and will be out of service for three months. Do I have to close if the elevators will not be operational on the closing date?

My husband and I own a co-op and we would like to transfer the shares to an irrevocable trust that we recently created for estate planning purposes. Will our cooperative allow us to make that transfer?

My boyfriend and I are interested in buying our first apartment in a new construction condominium. Our mortgage broker tells us we should qualify for a 90% loan, but it will be a close call for the bank. The sponsor wants us to sign a “no contingency” contract. Is that a good idea?

We are considering a condo purchase in a new development that is only 25 percent sold. There is a bank that has approved the project and will make the loan, but should we be concerned about the number of units that the sponsor still has to sell?

We are buying an apartment that has been extensively renovated. Among other things, the size of the master bath was significantly increased. Can we rely on a representation in the contract that all required approvals were obtained from both the Cooperative Corporation and from the New York City Department of Buildings?

We received a draft of the contract of sale for the cooperative apartment we are buying and our social security numbers are on the front page! Our attorney told us that we will have to provide our identification numbers to the managing agent for a credit check as a part of the Board package, so it’s not a big deal. Do we have to list our socials on the contract?

I am considering an apartment in a new construction condominium. There is park under development by New York City that will greatly enhance the value of the condominium when it’s completed. Although the sponsor’s salesperson indicated that the first phase of the park will be completed in the next year or so, the Offering Plan contains a “Special Risk” that states that the sponsor gives no assurance as to when, if ever, the park will be completed. Who and what should I believe?

We are in negotiations to purchase a co-op apartment on the Upper East Side. Our lawyer reviewed the minutes and discovered that the building has a bedbug infestation. Should we go forward with our purchase?

At my closing, I had to reimburse the Seller for his New York State “STAR” rebate that appeared on the maintenance statement for the month following the Closing. What exactly is the STAR rebate and will I be able to obtain the rebate as well?

I just found out that the seller will be unable to close for an additional two weeks. As a result, I will have to extend my rate lock, at a cost of $1,200.00. Is the seller obligated to reimburse this cost?

We are selling our apartment to our neighbor, but our neighbor can’t afford to purchase our apartment unless she sells her apartment. Her lawyer wants the contract to provide that the purchase of our apartment is contingent upon the sale of her apartment. Our lawyer is advising us against including a provision that makes the transaction contingent on the sale of the buyer’s apartment. Should we go along with the contingency?

We are selling our co-op and the buyer is not obtaining a mortgage in connection with the purchase. The contract required the Board package to be submitted within 10 business days after the fully-executed contract was returned to the buyer. The buyer is two weeks late in submitting the package. Is the buyer in default?

I’m selling my condo and I have not been able to pay my common charges for the past six months (I lost my job). I have a buyer for the apartment, but the Board of Managers will not release the Waiver of the Right of First Refusal, unless I pay the outstanding balance of the common charges. I’m between a rock and a hard place, as I don’t have the money. What should I do?

I am combining two adjacent apartments that I own and I want the co-op to issue one stock certificate for both apartments. There is an outstanding UCC lien against one of the apartments. The other apartment is owned free of any liens. Can the co-op object to the combination?

My attorney asked me to contact the managing agent to verify the maintenance and assessment information that's disclosed in the contract for the apartment I intend to purchase. Isn't that my attorney's job?

Our application to purchase a co-op was turned down by the Board without an interview. Although our attorney asked the managing agent to disclose the reasons for the Board’s decision, none were given. Can the Board just turn our application down without any explanation?

I am buying a co-op in Manhattan. The managing agent is located in Brooklyn and refuses to send a closing representative to the attorney’s office for the buyer or seller located in Manhattan. Will everyone have to go to Brooklyn for the closing?

We are purchasing a condo that was occupied by a tenant at the time the contract was executed. We just did the walk through and there is damage to a portion of the floor that was hidden by the tenant’s furniture. Are we entitled to a repair credit at Closing?

A loan commitment was issued, but the bank requested an explanation for a $14.00 missed credit card payment that occurred nine years ago. Could the bank withdraw its commitment as a result of this missed payment?

A leaking pipe inside the wall of my co-op was recently replaced. The following month, my maintenance account was charged $1,000.00 on the theory that the pipe only serviced my apartment. Am I responsible for this repair?

We submitted our Board package a month ago, but the Board has not scheduled an interview or asked for any additional information. To make matters worse, the managing agent won’t give us any indication as to what’s going on. Is there anything we can do?